In a Wall Street Journal op-ed, “The Real Story of the ‘China Shock‘,” economists James J. Heckman (a Nobel laureate at the University of Chicago) and Hanming Fang (University of Pennsylvania) argue that the turn-of-the-century trade disruption primarily shifted jobs from one region to another rather than eliminating them nationwide. Moreover, they contend that Chinese imports delivered substantial benefits to consumers, and that automation—not trade—was the main cause of manufacturing job losses.
The lack of public understanding about these economic realities—suggested by numerous studies over the past half-decade or so—is problematic to current American policymaking (and politics, I would add):
The danger of blaming Chinese trade is that the U.S. is misdiagnosing the problem and pursuing the wrong solutions. While tariffs on Chinese goods might bring back a few factory jobs, they will raise prices for everyone and hurt U.S. businesses that rely on imports. Current attempts to turn back the clock by introducing tariffs are a costly remedy for a poorly understood ailment.
Not that authors dismiss the suffering of people who lost jobs. Far from it. Again, from the op-ed:
It’s true that communities exposed to heavy Chinese import competition saw steep drops in manufacturing jobs and a rise in local unemployment. Crucially, the displaced workers mostly stayed put rather than moved for new work. It’s no wonder these academic papers resonated because they highlighted real pain in America’s industrial heartland. But treating the China shock as a verdict on national employment is a mistake.
I think there’s a lesson here when thinking about the emerging Age of AI: It’s going to be messy. Jobs will be lost, jobs will be changed, and jobs will be altered. As such, it will be possible to cherry-pick your way to whatever conclusion you want. But good-faith analysis will take a broader view.
A new Financial Times piece about Walmart neatly illustrates the messy complexity of AI- and robotics-driven workplace transformation. The story there defies simple narratives about job loss from automation. From the FT:
Walmart in April showed off labour-saving technologies to investors and media at two new warehouses outside Dallas — one a cold-storage hub for foods, the other a fulfilment centre to enable speedy deliveries for ecommerce customers. About 600 associates work inside the 730,000 sq ft refrigerated warehouse. The ratio amounts to one employee for every 1,200 sq ft, about the size of a small home. Inside, a multi-tiered geometry of lifts, conveyors and sorting machines handles pallets of eggs, meat, produce and other perishables after they arrive from suppliers, storing them in racks as tall as 80ft. Guided by algorithms, robots later sort foods to be bundled and dispatched to coolers at 175 stores in the region. The centres can ship more than twice the volume of traditional cold warehouses, while cutting costs by 20 per cent. Rob Montgomery, Walmart’s executive vice-president of supply chain operations, said the technology saved associates from walking miles and lifting tens of thousands of pounds daily: “Here, our associates are working with automation to achieve the job.”
Some specific job tasks have vanished, yet others evolved significantly. Meanwhile, entirely new positions emerged in ecommerce operations that company executives say “didn’t exist just a few years ago,” as Walmart battles Amazon online while maintaining its physical store dominance.
Again, from the FT:
Walmart executives say the technology investments mean new roles for workers, not fewer. “Tasks will get automated. Jobs will change. And many years from now, we’ll still employ a large number of people and be happy to do so,” chief executive Doug McMillon said at an investor event in April. … “Walmart executives said they expected the company’s total payroll to stay roughly constant even as its business evolves.”
Rather than “robots will take all the jobs,” the Walmart experience provides a helpful baseline for thinking about technology and the job market.